The Commodities Feed: Hormuz recovery continues to weigh on oil market
Lead — The oil market is experiencing downward pressure, primarily due to a recovery in flows through the critical Strait of Hormuz. Per the full note from ing-think, while current traffic remains significantly below pre-war levels, the market's expectations for a swift revival in supply appear overly optimistic given the geopolitical context and existing inventory data. The recent American Petroleum Institute (API) report reflecting inventory movements underscores the delicate balance of supply and demand dynamics amidst these developments.
What the desk is arguing
The desk argues that the current decline in oil prices may be unwarranted, as signs from the Persian Gulf suggest a potential recovery in oil supply. According to ing-think, despite recent increases in vessel traffic, overall flows remain well shy of historic norms, which complicates the narrative of a straightforward market recovery.
Key indicators support this view, with API data showing a modest decrease in US crude oil inventories by 800,000 barrels, indicating a tightening supply landscape. Furthermore, the observed drop of 1 million barrels at the WTI delivery hub in Cushing is emblematic of a market that may not be as oversupplied as current price movements suggest.
The alternative read would note that a rapid recovery in global oil supplies could trigger a steeper sell-off in prices if the anticipated demand growth fails to materialize.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices are declining due to improved flows from the Strait of Hormuz.
- 02Current vessel traffic through the Strait still lags behind pre-war levels, undermining recovery optimism.
- 03The API report indicates tighter US crude oil supplies, suggesting market conditions are more balanced than prices reflect.
- 04Potential Russian diesel export ban could add further complexities to global refined product supply.
Market implications
Traders should keep a close eye on the $70 level in Brent oil prices, as a break below this could trigger additional selling pressure. Additionally, the upcoming API inventory data could serve as a significant catalyst, providing further clarity on US supply dynamics.
Risks to this view
A reversal of this thesis could occur if flows through the Strait of Hormuz exceed expected levels or if geopolitical tensions ease significantly, leading to a rush of supply that overwhelms demand. Additionally, any unexpected announcements regarding Russian energy exports, particularly a diesel ban, could further distort market perceptions and pricing.
Articles The Commodities Feed: Hormuz recovery continues to weigh on oil market 02:10 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices continue to move lower as flows from the Persian Gulf start to recover. Price action suggests the market is assuming a rapid recovery in traffic through the Strait of Hormuz Warren Patterson and Ewa Manthey Energy – Russia considers diesel export ban Oil prices continue to grind lower, with ICE Brent settling a little over 1% lower yesterday. Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz.
Vessel crossings increased in recent days, although they remain well below pre-war levels. Estimates suggest that roughly 6-7m b/d of oil moved through the strait in recent days, which is still far below pre-war flows of around 20m b/d. However, with pipeline diversions for Saudi Arabia and the UAE, we only need to see oil flows through the strait return to around 14m b/d for oil supply from the Persian Gulf to return to pre-war levels.
We continue to believe that the oil sell-off is overdone, with the market still tightening. Clearly, price movements suggest the market expects a fairly rapid recovery in Persian Gulf oil supplies. The latest numbers from the American Petroleum Institute (API) show that US crude oil inventories fell by just 800k barrels over the last week.
Crude stocks at the WTI delivery hub, Cushing, fell by 1m barrels. Refined products saw inventory builds, with gasoline and distillate fuel oil stocks increasing by 1.2m barrels and 1.4m barrels, respectively. Refined product supply concerns in Russia continue to grow amid ongoing Ukrainian attacks on Russian energy infrastructure.
Russia has already imposed export restrictions on gasoline and jet fuel, but there are reports that the government is considering a ban on diesel exports. A diesel ban would be more significant for global markets than the gasoline and jet fuel ban, given that Russia exports around 900k b/d of diesel. This potential ban offered some renewed strength to the ICE gasoil crack, with it trading back above $41/bbl, up from around $38/bbl earlier this week.
European natural gas prices haven’t come under the same pressure as oil prices, even as energy flows from the Persian Gulf start to pick up. A heatwave across large parts of Europe will provide some relative support for natural gas, likely boosting power-sector demand to meet cooling needs. In addition, high temperatures in France are forcing some nuclear plants to reduce output.
This, in turn, means the power sector is likely to lean more heavily on gas-fired generation. The potential for stronger summer gas demand would make refilling gas storage more difficult. This task was already going to be a challenge, given Middle East supply disruptions and storage trending well below average.
Metals - Risk-off move triggers metals sell off Metals sold off after a sharp decline in global equity markets sparked a broader risk-off move across asset classes during Tuesday’s session. Aluminium led losses as easing concerns over Middle East supply disruptions and improving US-Iran relations weighed on sentiment. A more hawkish outlook from the Federal Reserve added pressure across the metals complex.
Despite the recent sell-off, aluminium fundamentals remain supportive. We continue to expect the global aluminium market to remain in deficit this year; conflict-related disruptions have already removed an estimated 3mt of production. Easing geopolitical risks may remove some risk premium from prices, but they don’t materially change the tight underlying market balance.
Positioning data also turned less supportive. The latest COTR report shows copper net longs fell by 3,669 lots for a third consecutive week to 57,458 lots. Aluminium net longs dropped by 6,024 lots to 74,361 lots, the lowest level since January 2023.
This is driven largely by long liquidation as concerns over disruption to shipping through the Strait of Hormuz eased. Zinc net longs also declined by 2,778 lots to 30,415 lots, the lowest level since November 2025. Gold also came under pressure, falling alongside a broader market sell-off, towards $4,000/oz.
A stronger US dollar and expectations that the Fed could keep rates higher for longer outweighed safe-haven support from geopolitical risks. Silver, meanwhile, slumped 5%. While geopolitical risks remain elevated, gold is likely to trade in line with Fed expectations, leaving prices vulnerable to higher yields and a stronger dollar in the near term.
TTF Strait of Hormuz Speculators Russia-Ukraine Precious metals Persian Gulf Natural gas Middle distillates LNG Iran conflict Geopolitics Gasoil Diesel API Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Warren Patterson Head of Commodities Strategy Warren Patterson is Head of Commodities strategy based in Singapore.
He joined the bank in April 2016 and covers the entire commodities complex. Previously, he worked at a commodities trade house… Ewa Manthey Commodities Strategist Ewa Manthey is a Commodities Strategist based in London. She joined the bank in September 2022 and covers the entire commodities complex, with a particular focus on the metals markets.
She has… In this article Energy – Russia considers diesel export ban Metals - Risk-off move triggers metals sell off
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